Labor and Employment

To ensure that manufacturers in the U.S. can continue to create jobs and compete effectively in the global marketplace, Congress should extend three important tax policies, the NAM, along with more than 1,300 businesses and associations, told congressional leadership today.

What needs to be done: The House and Senate must act swiftly to ensure that the tax code supports innovation, enables businesses to finance growth and incentivizes capital equipment purchases.

• On R&D: Allow businesses to once again fully deduct research and development costs in the same year in which they are incurred.
• On interest deductibility: Reverse a stricter interest deductibility limitation that makes it more expensive to undertake job-creating investments.
• On full expensing: Extend 100% accelerated depreciation, which reduces the after-tax cost of capital equipment purchases.

The background: For nearly 70 years, the tax code allowed businesses to immediately deduct their R&D costs. However, beginning in 2022, the tax code began to require businesses to amortize the costs over a period of years.

• In the same year, a stricter interest limitation—which acts as a tax on investment—went into effect. This stricter limitation disproportionately harms manufacturers given their significant capital-intensive investments.
• Finally, full expensing, a critical pro-growth incentive, began to phase down this year and is scheduled to be eliminated completely by 2027.

NAM in the news: Bloomberg Tax and Semafor (both subscription) covered the NAM-led advocacy to Congress.

The last word: “On behalf of the millions of American workers whose jobs depend on a competitive U.S. economy, we urge all members of Congress to work together by year’s end to seamlessly reinstate immediate R&D expensing, restore a pro-growth interest deductibility standard and extend full expensing,” the NAM-led business community told Congress.

“Doing so will secure the U.S. as a global leader in innovation, incentivize job-creating investments and reinforce America’s competitiveness on the world stage.”